Average mortgage rate in Finland - 1.09% tracker!

Discussion in 'The Fair Mortgage Rates Campaign' started by Brendan Burgess, Jun 15, 2017.

  1. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    31,379
    Last edited: Jun 15, 2017
    I attach an extract from the CPPC report into mortgage rates.

    It has studied the Finnish mortgage market

    Similarities to Ireland
    Members of the eurozone - same as Ireland
    Total size of mortgage market - €92 billion - a bit smaller than Ireland's €124 billion
    Source of funding: Primarily retail deposits - the same as Ireland
    Maximum LTV 90% for second time buyers, 95% for FTBs. - Looser than in Ireland


    Differences from Ireland
    Mortgages track the Euribor rate
    The Finnish banks seem to require additional collateral - Average loan to collateral is 68%
    Defaulted stock 1.2% in Finland- compared to 18% in Ireland (in 2015?)
    No Loan to Income caps in Finland, but they are planned.
    Finnish banks seem to compete by offering one year interest only deals.
     

    Attached Files:

    Last edited: Jun 15, 2017
    Dauhee likes this.
  2. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,770
  3. RedOnion

    RedOnion Registered User

    Posts:
    31
    I'm not too familiar with the Finland market, but it's not a fair comparison taking a country where customers borrowing over 70% LTV can get a state guarantee for the extra (the main source of the extra collateral). From a bank risk point of view that's a nice position to be in - the amount of their own capital required is minimised.
    Similarly tracking Euribor Vs ECB is much lower risk.
     
  4. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,770
    It is provided the State doesn't go bust as a result!

    Finland boomed after oil was discovered off the coast in the mid-1980s. With low interest rates and loans available for the asking, house prices soared. Then, as the Soviet Union collapsed, unemployment rose and house prices started to fall, creating problems first for builders, then for homeowners, and finally for banks.

    The Finnish banking system effectively disintegrated under the weight of bad housing loans and had to be rescued, at huge expense, by the State.

    Sound familiar?
     
  5. fidelcastro

    fidelcastro New Member

    Posts:
    2
    Hi, having knowledge of Finland the country has no oil or gas reserves. It is however an exceptionally well run country in terms of public administration, planning and environment with very high standards of education and innovation. The main trading block is with the Eurozone area and are more closely intertwined with this group than the Republic of Ireland.
    Housing is very very expensive. A 30msq flat in an ordinary Helsinki area will cost c.140k Euro. The standard of housing is very high however.
     
    Dauhee likes this.
  6. Sarenco

    Sarenco Frequent Poster

    Posts:
    3,770
    I didn't mean to imply that Finland itself had oil or gas reserves but rather that the discovery of oil and gas in the North Sea ushered in a boom period in the 1980s.

    I've absolutely no doubt that Finland is an exceptionally well run country. But it already experienced a credit fuelled housing bubble and subsequent banking bust in the late 1980s and it certainly appears from the outside that it may be repeating at least some of the same mistakes again now.
     
  7. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    31,379
    Hi Red Onion

    That is very interesting. I did wonder where the collateral could come from. I doubt if many first time buyers would be able to provide other assets as collateral. I had thought it might be parental guarantees or, indeed, a cross charge on the parent's home.(The CCPC report should have mentioned such a salient factor.)

    Have you a link to some more information about the government guarantee?

    It effectively mean that the LTV is 70% from the banks' point of view.

    So Finnish lenders are offering 70% mortgages at 1.09% trackers. Compared to the lowest rate of 3.1% for a 70% mortgage here.

    I am still astonished how it could be so low. I wonder if there are other charges?

    Brendan
     
  8. RedOnion

    RedOnion Registered User

    Posts:
    31
    I couldn't find much in English so relying on Google translate. There is an expat site with some info, but I can't post links yet.

    I think the more interesting question to ask is how their repossession process works, and if the borrower can be pursued for any shortfall.
     
    Sarenco and Dauhee like this.
  9. RedOnion

    RedOnion Registered User

    Posts:
    31
  10. RedOnion

    RedOnion Registered User

    Posts:
    31
    Interestingly, here's a schedule of charges for Nordea in Finland.

    https://www.nordea.fi/en/personal-c...ome/housing-loan.html#tab=Prices_Key-Customer

    There is an arrangement fee charged to the customer. Additional charge where there is a guarantee. And a per item charge for collecting the repayments, and also for any reminder notifications for missed payments (Irish banks aren't allowed to charge these under MARP)
     
    Sarenco likes this.